Last Friday (9 January), the Council of the European Union officially greenlit the signature of the landmark EU-Mercosur trade agreement, marking the culmination of a diplomatic marathon that began in 1999. In a move designed to bolster the EU’s geopolitical standing against rising global protectionism, European Commission President Ursula von der Leyen will travel to Asunción, Paraguay (the country holding Mercosur’s rotating presidency), this weekend to formalise the pact alongside Mercosur leaders. The decision, which paves the way for the creation of the world’s largest free trade zone covering 700 million consumers, follows a dramatic breakthrough in December when Italy withdrew its opposition in exchange for enhanced agricultural protections.
The road to this moment has spanned over 25 years, outlasting several generations of political leaders. The final hurdle was cleared only after intense negotiations addressed the concerns of Member States. In December, Italian Prime Minister Giorgia Meloni secured a vital compromise: a “bilateral safeguard” mechanism. This allows the EU to rapidly re-impose tariffs if a sudden surge in Latin American agricultural imports causes “market disturbances” for European farmers.
The agreement is now split into two parts to speed up implementation:
- The EU-Mercosur Partnership Agreement (EMPA): A comprehensive framework covering political dialogue, human rights, and climate cooperation. This requires ratification by all individual EU national parliaments.
- The Interim Trade Agreement (iTA): A “trade-only” version that falls under the EU’s exclusive competence. This can be implemented much faster, as it only requires the green light from the Council and the European Parliament.
Economic winners and domestic frictions
The economic logic behind the deal is significant. In 2024, trade in goods between the two blocs exceeded €111 billion. For the EU, the primary “winners” are the industrial powerhouses. Manufacturers of automobiles, pharmaceuticals, and chemicals will benefit from the removal of high tariffs, while European providers of digital and financial services will gain unprecedented access to South American markets.
However, the deal has clear “losers” and vocal critics. EU beef and poultry farmers fear they cannot compete with the lower production costs of Latin American giants. This has sparked widespread protests, particularly in France, where President Emmanuel Macron remains a staunch opponent. Environmental groups have also raised alarms, noting that Brazil’s soy industry recently stepped back from anti-deforestation pacts. While the agreement includes a “rebalancing mechanism” to penalise partners who breach climate goals, critics argue these measures are too weak to prevent further damage to the Amazon rainforest.
The final hurdles: European Parliament and EU courts
Despite the Council’s signature, the agreement is not yet a done deal. The focus now shifts to the European Parliament, where a high-stakes battle is brewing as the Parliament’s consent is needed to ratify EU trade deals. Many political groups are increasing their opposition to the deal.
Next Wednesday, 21 January, MEPs will vote on a resolution to refer the agreement to the European Court of Justice (ECJ). A group of over 140 lawmakers argues that the deal’s “rebalancing mechanism” might bypass EU treaties or undermine environmental laws. If the ECJ is asked for a legal opinion, the entire ratification process could be frozen for up to two years.
If the legal challenge fails, the Parliament will hold a consent vote as early as May. While proponents, led by the German government, are confident of a majority, the narrow margins in the Council, where only a few mid-sized countries stood between success and a blocking minority, suggest that the debate in Strasbourg will be anything but quiet.
Conclusions
The EU-Mercosur deal is more than just a trade pact; it is a strategic attempt to ensure Latin America remains within the EU’s “orbit” rather than drifting further toward China’s economic influence. While the signature in Asunción marks a historic milestone, the coming months will test whether the EU’s democratic institutions are ready to embrace a deal that has been a quarter-century in the making.
